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Operations in insurance with Stephanie Lotz

Operations is central to customer and employee experiences in insurance—and there’s much room for improvement.

The COVID-19 crisis introduced opportunities for insurers to refine their operations, but there is still a lot of untapped potential. McKinsey spoke with Stephanie Lotz, a partner in the Paris office, to understand more about the relevance of operations in insurance and how, and where, insurers can implement improvements.

McKinsey: Why are operations improvements in insurance so imperative?

Stephanie Lotz: Refining operations allows insurers to provide a better experience for people. Excellence in operations is the most relevant driver for an outstanding customer experience. Better operations also make for smoother experiences for employees in contact centers, claims, sales, and in internal support functions, which usually make up between 60 and 80 percent of the total workforce.

McKinsey: What are the challenges that come with making these improvements?

Stephanie Lotz: Excellent delivery of customer journeys in an omnichannel approach remains a major challenge. It is not a new topic, but the operational challenges to delivering a seamless journey are still very present in the day to day. Much of that struggle is because cross-functional collaboration is often not deployed to the extent necessary in a complex work environment.

The momentum created by COVID-19 could have been used to a larger extent to realize digital solutions and create a seamless omnichannel experience.

Through our contact center benchmark work, we found that most insurance companies lack a true omnichannel approach—traditional channels like telephone and mail and even fax are still the most relevant channels for communication in insurance besides the physical network. There are, of course, some lighthouse insurance companies that have shown tremendous progress in the development of their online journeys, but they remain an exception.

The momentum created by COVID-19 could have been used to a larger extent to realize digital solutions and create a seamless omnichannel experience across a large variety of channels. But despite all the efforts around agility, technology and operations are still not as integrated as they could be. And technological and operational considerations are not sufficiently incorporated into cross-functional considerations (for example, integration into product development processes). To overcome this, the insurance industry should break up its siloed thinking across teams.

McKinsey: Which operational innovations are the most effective or have the most potential?

Stephanie Lotz: There are three key areas in which operations play a major role for insurers.

First, service to solution, which is the capability to constantly reflect on the best insurance protection for customers at every point of contact. It offers tremendous sales potential and is a great opportunity to turn a simple service contact into a positive, broader experience for a customer.

Second, there is big opportunity in innovative product development at scale, which implies that the operational delivery is already thought through when the product is designed. For example, someone could buy a protection plan coupled with a service app that enables the direct processing of a claims request. Or a building insurer could develop integrated products with a smart home provider.

Innovative products should be designed in an ecosystem context.

And lastly, there’s a lot of untapped potential in ecosystem building, which is strongly interlinked with innovative product development. Innovative products should be designed in an ecosystem context. For example, the best building insurance should already be thought through before starting a renovation or building process. That way, certain investments, like better burglar protection, can be directly integrated into the best protection plan. To be successful at this, insurers must have excellent operations that enable them to design processes with different stakeholders in mind.

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Stephanie Lotz is a partner in McKinsey’s Paris office.